The lawsuits say the banks did it to maximize loan origination costs and their own profits before the PPP fund ran out. Let’s go. The loans, made through the United States Small Business Administration, were said to be first-come, first-served, according to the dispute.
JPMorgan Chase, the largest US bank, lent $ 14 billion under the Paycheck program, more than any other bank. JPMorgan’s average PPP loan size was just over $ 515,300, more than double the average size of all loans made by all banks under the program, which was $ 206,000, according to data from Small Business Administration.
It is also much larger than the average loans sought by JPMorgan clients who were unable to access assistance in the first round of nearly $ 350 billion in PPP, which ran out of money in less than two weeks. Congress is working to put hundreds of billions more into the program, and JPMorgan said Monday it has processed 40,000 additional loan applications that it is willing to push, although once small business funding becomes available . The average size of these loans: $ 182,500.
“Chase has hidden from the public that he is reshuffling the received P3 requests and prioritizing the requests that would make the most money in the bank,” said one of the class actions filed Sunday against JPMorgan.
JPMorgan declined to comment on the lawsuit. The bank said on Sunday that it had granted 18,000 PPP loans to its “small business customers”. This was more than double the 8,500 loans made by parts of the bank that serve medium-sized businesses, the company said.
“I also understand that many of you are frustrated that you applied at the start of the process, but that SBA funding ran out before you could receive a loan,” said Jennifer Roberts, CEO of Chase Business Banking, in a press release published Monday on the bank’s website. . “We want you to know that we are working to ensure that as many of our Commercial Banking clients as possible receive loans.” “
Bank of America,and other large banks have also been the target of similar lawsuits by the law firm conducting the case against JPMorgan and another firm.
A Bank of America spokesperson said the bank denied allegations that it had issued payday loans to maximize profits. A Wells Fargo spokesperson said the bank “is working as quickly as possible to assist small business customers with the paycheck protection program in accordance with regulations and guidelines provided by the US Treasury and the SBA.”
The paycheck protection program was one of the first congressional $ 2.2 trillion authorized CARES rescue programs to start. The program offers loans at very low interest rates. But the big advantage of the program is that the loans, as well as the interest, are canceled as long as most of the proceeds are used to continue paying the employees. This basically makes PPP loans free.
The program focused on small businesses and was generally open to businesses with 500 or fewer employees. But the SBA made a number of exceptions to these rules, most of whichand hotel chains. Other businesses that many people do not normally consider small businesses have also accessed the program.
that they have received over $ 250 million in P3 loans. Seven companies have revealed they have obtained $ 10 million or more in funding from the program, including owner of restaurant chains Ruth’s Chris Steakhouse, Shake Shack, J. Alexander’s, Pollo Tropical and Potbelly, as well as computer firm Quantum and the oil explorer Hallador Energy.
JPMorgan has made PPP loans to four of the top seven known borrowers in the program. Two of the others were manufactured by PNC Bank of Pittsburgh.
Shake Shack, who was approved for a $ 10 million PPP loan, said Mondaygiven that so many other small businesses have been excluded from the program. Shake Shack got his loan from JPMorgan.
“I have a growing sense that some of these policies benefit those who least need them at the expense of those who need them the most,” said representative Dean Phillips, a Democrat from Minnesota, who said: last week called on Congress to make additional help for small businesses available. “A food truck should have equal access to these funds like Shake Shack. We need to make sure that programs like the PPP are accessible to everyone, and that every dollar of these programs is counted and advertised. “
Lou Rabon, who is the CEO of computer security consultancy Cyber Defense Group, said he had submitted his PPP loan request to JPMorgan on April 6, which was the first day the bank started to take requests. He said he quickly heard from his banker that the request was underway. Rabon said his business has been a client of JPMorgan since the business started four years ago, and has a checking account with the bank as well as a line of credit.
Rabon said his business is looking for a loan of less than $ 200,000. He hoped to use the money to continue paying a dozen full-time employees. Now he said he was unsure how long he could do it: he learned last week from JPMorgan that his P3 request had not been approved in time.
“It was supposed to be first come, first served, but when you look at the statistics, it seems clear that JPMorgan first served its biggest customers,” said Rabon, who is the lead plaintiff in a class action lawsuit. against JPMorgan on Sunday. . “When your bank is not there when you really need it, it is not a bank we want to do business with. “
A spokesperson for JPMorgan said it handles loans on a first-come, first-served basis, but that the bank’s different divisions have processed PPP loans for their own customers. The commercial bank received a few thousand requests and was able to process them all before the federal program ran out of money. JPMorgan’s small bankers, however, have received hundreds of thousands of requests. Only a small fraction of these requests could be processed on time.
“JPMorgan’s explanation does not meet the requirements of the law and civil liability,” said Rabon’s lawyer Dylan Ruga of the Stalwart Law Group. “The P3 program was designed to help small businesses keep the lights on, and it was supposed to be first come, first served. This is just another example of a program to hijack Main Street by Wall Street. “